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3 Tips for Recovering from Bad Credit

3 Tips for Recovering from Bad Credit

bad credit

Having bad credit can feel hopeless and like a burden you will have to carry for the rest of your life. But, while recovering from bad credit isn’t easy, it’s possible. In fact, many people have already done it. Below are three tips for improving bad credit.

1. Start Paying or Arrange Payment Plans 

The most apparent solution for repairing bad credit is to start repaying the debt you owe. Start by making the minimum payments that your creditors will allow and be determined to stick to those payments, regardless of how much fun it would be to spend that money on dining out instead.

If you can’t make the payments, call the company and ask to arrange a payment plan that you can afford. Creditors are usually willing to work something out. After all, getting a little bit of money is better than getting nothing at all. It might take a while to pay the whole debt back but the fact that you’re making regular monthly payments will result in positive marks on your credit report, which will boost your credit score.

If you have debt with several creditors and worry that you won’t be able to work out a payment plan with all of them, consider talking to a debt consolidation company. These companies will turn your several monthly payments into one payment, allowing you to focus on reducing your debt one payment at a time.

2. Dispute Inaccurate Items on Your Credit Report 

A beneficial step for repairing bad credit is to scour your credit report and check for any incorrect items that could be removed. You can obtain a copy of your credit report through the government website AnnualCreditReport.com, or one of the many paid credit-reporting sites. Once you have your credit reports look at each item and mark anything incorrect. For example, if you see a delinquent credit card account that you never opened, make a note of it. If something is marked as “not paid” when you know you paid it (and have records to prove it), note that. You can contact the appropriate credit bureau and dispute these incorrect items. If you can prove that they don’t belong to your report, the credit bureau will remove them. Removing false, unpaid accounts from your credit report will raise your credit score.

3. Get a Secured Credit Card 

One of the most effective ways to fix bad credit is to get a secured credit card. Remember, this step should only be taken AFTER you do the above two steps – opening a new line of credit at the same time you’re already behind on another is counterproductive. A secured credit card works by requiring you to deposit a certain amount of money, which becomes your credit limit. For example, if you give them $250 as a deposit, your credit limit on that card will be $250. The bank will retain your money as collateral in case you don’t pay off what you charge to the card. Since secured cards are intended for people with bad credit or no credit, you have a better chance of being approved compared to a regular credit card.

One great feature of secured credit cards is that, just like a regular card, your activity is reported to the credit bureaus, so as long as you’re responsible and make your payments on the card, that will be reflected as a positive mark on your credit report. Stay disciplined and accumulate enough positive marks, and your credit score will start to go up.

As you can see, it’s not impossible to recover from bad credit. Start paying your debts, arrange a payment plan, comb through your credit report for any inaccurate items, and consider a secured credit card. Follow these steps and you’ll be well on your way to financial success.

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